Thursday, March 11, 2010

Following on the last post on grassroots NGOs, here's another post (in Chinese and English) from Yu Fangqiang, who works for Yirenping Center for Anti-Discrimination Law, a Chinese NGO that was in the news last year when its office in Beijing was raided by Chinese authorities, and its publications confiscated. I met Fangqiang and interviewed him a few months prior to that raid when I was in Yunnan interviewing a HIV/AIDS NGO. Fangqiang was working with that NGO to develop a program to provide legal assistance to people who were being discriminated against because they were HIV positive. Not surprisingly for someone who works on the front lines, Fangqiang's observations about the challenges facing grassroots NGOs in China are right on the mark. He also has some interesting criticisms about the way in which international NGOs and foundations deal with grassroots NGOs, giving them funding for projects but ignoring their core funding needs to pay for staff, office equipment, and other expenses that an NGO needs to survive.

This article was taken from an online colloquium on Yazhou Diaocha (Asia Investigation), http://yazhoudiaocha.com/commentary/225.php

In mainland China it is extremely hard to start-up a non-governmental organization (NGO) without a background in government. The difficulties are due to restrictive government policies, monopolization of resources by NGOs with government background, a lack of trust throughout the overall society, the lack of capabilities among the grassroots' organizations, and unrealistic expectations from funders.

Restrictive Government Policies

The Constitution of the People's Republic of China requires that all its citizens have the rights of freedom of speech, freedom of the press, and freedom to peaceably assemble, organize, demonstrate and petition. However, in order to organize in mainland China (i.e., to establish an NGO), one has to register the organization according to the Social Organizations Registration and Administration Act. If the organization does not do this it is not protected under the law. It is criminal for such an organization to publicly accept outside donations without a legal status. In addition, to establish such an NGO, they must have a regular business location, full-time staff, a registration capital of more than thirty thousand yuan and official documents with a stamp of approval from the governmental agencies, which have been designated as "supervising offices."

The fact that one non-governmental organization will be co-administered by a civil affairs governmental office and another public administration office represents the unique "Chinese way" of double administration. However, in reality what happens is that few public administration offices actually are interested in bearing the "troubles" of being a "supervising office." Recently the Social Organizations Registration and Administration Act has been amended. It now states that organizations that are disqualified from registering may still get legal status under a separate filing system. However provisions of the amended Act, enacted in nearly twenty provinces and cities across the country, are expected to still be discouraging.

Monopoly of Resources by NGOs with Government Background

Because of the rigorous administration of NGOs, only those with government background are able to register. Some NGOs - such as Disabled Persons' Federation, Women's Federation, National Labor Union, etc. - all have governmental background. These organizations are called "GONGO" in China. Some of the staff of these NGOs are even on the government payroll. These "GONGOs" have long monopolized the philanthropic resources of China, including their funding, human resources, social trust, etc. Take for example last year's Wenchuan Earthquake. Donations from all over the country were only distributed to the stricken region via the Red Cross Society of China or China Charity Federation. Other organizations that publish bank account numbers to solicit and accept donations run the risk of being charged by the court, according to a research report done by the Center of NGOs, at Tsinghua University.

A Lack of Trust Throughout Society

Since the Reform and Opening Policy of 1978, Mainland China has seen tremendous social changes both politically and economically. The past "society of acquaintances" completely fell apart due to the rapid urbanization process. In addition, its traditional social values were devoured by the "money first" principle driven by self interests. In this context a grassroots NGO with no legal status faces harsh and even irrational doubts and a long road to societal acceptance. In general, the public does not believe that one person, with no government affiliation, would do something beneficial for society without a self-interested motive. Also because of this lack of trust, enterprise sponsorships prefer funding causes or organizations that the government has endorsed.

The Lack of Capabilities Among Grassroots Organizations

Admittedly, many people involved with NGOs are idealists who want to realize their dreams for society. They might not be all that great in dealing with finances, administration and external communication. However, many NGO managers in mainland China are people who were 'failures' in society - they are abandoned by the old system and are forced to this whole new world of NGOs, with enormous limitations in both their capability and their visions. "Administration crises" can easily arise in their organizations because of non-transparent financial records, loss of talent, and an eroding sense of mission. Once these difficulties become public, they are almost always unable to be resolved.

Unrealistic Expectations from Funders

Today, there are already many grassroots NGOs in mainland China. Most of them are unregistered, others are registered as business organizations. Fewer are registered at a civil affairs office. There are increasingly more foundations that support these NGOs, such as the Global Fund, The Asia Foundation, Ford Foundation, and Gates Foundation. Even though these agencies have made tremendous contributions to the growth of NGOs in mainland China, their negative impact can be just as profound. They tend to see these NGOs as tools to accomplish their local projects, so they only fund their own specific activities and ignore the broader reality, which is that these NGOs also need to pay bills, salaries, administration costs, office supplies, rent, etc. Consequently, grassroots NGOs sometimes resort to manipulating their books in order to survive and this leads to very serious financial problems. When this happens, funders tend not to seek better solutions, but instead they severely criticize the NGOs, which creates an even more difficult situation.

One important thing these funders need to know:

In specific areas, these NGOs have critical close connections with vulnerable groups such as Injecting Drug Users (the IDU population), Men who have sex with men (the MSM population), people infected with HIV, and the migrant population. The government or governmental NGOs simply cannot accomplish their projects without the assistance from grassroots NGOs.

About the author:

Fangqiang Yu, Managing Partner of Beijing Yirenping Center for Anti-Discrimination Law. He focuses on the social development of citizens living in mainland China, and specialized in AIDS-, HBV-, labor-, education assistance-, rare disease-related fields.

Sunday, March 7, 2010

The following was taken from Asia Catalyst, a blog set up by Meg Davis about human rights and NGOs in Asia.

March 4, 2010 3:54 PM | No Comments
By Christina Lem

At times of change, start-up organizations should ask themselves what they want to become. If you want to remain independent, what is your future plan? Do you eventually want to be absorbed into a larger organization? Will you shut down once the need you're serving is met? NGOs should know how to shape their own future before others make the decision for them.

A few years ago, I visited over 50 non-profit organizations throughout Southern and East Africa on behalf of a foundation. The majority were grassroots groups created by dynamic founders who were determined to provide direct services or advocacy aid to those in terrible circumstances. Often these organizations had tiny staff and relied on community volunteers. They had just enough skills to create a budget and to document metrics that measured outcomes. Some didn't, and were considered to be failing by the international NGOs that were giving them technical advice. Almost all were dedicated to the work, but overwhelmed by weak management skills, low capacity, emotional burnout, limited financial resources, donor fatigue, and lack of infrastructure and trust in government.

This was despite the fact that in 2007 Sub-Saharan Africa received USD 38.7 billion in international aid. Much of the money trickled down to these grassroots organizations via government or large NGOs serving as their intermediaries, where bottlenecks and drip feeds were common. Grassroots NGOs often complained of not receiving the technical skills they needed to become self-sufficient, while their technical advisors, who were either government or large NGOs, frequently felt NGOs were not organized enough to implement what they were being taught. It was a constant, frustrating tug-of-war.

Grassroots NGOs face similar challenges in Asia. In some Asian countries, NGOs also face a difficult legal non-profit registration system. In China, for instance, non-profits without governmental approval must register as business organizations, without tax exemption and non-profit legal protection. Yet these restrictions have not slowed the growth of China's non-profit sector. According to the Ministry of Civil Affairs, the number of those registered as government-operated non-governmental organizations (GONGOs) jumped from 6,000 nonprofit organizations in the late 1990s to 386,916 in 2007. Most grassroots organizations work without any registration.

For groups like these, private funding is critical for sustainability. But money is only part of the equation. Sooner or later almost all private funders will ask their grantees questions about their plans for long-term sustainability and organizational growth, especially international funders. Most grassroots directors are activists, not business managers. But these two realms may not be as different as they might seem.

In the US, only 30% of start-up businesses still exist after 10 years. According to Scott Shane's "The Illusions of Entrepreneurship," sole proprietorships--such as single-starter non-profits--have the highest rates of failure. One likely reason is that they frequently begin operations without plans for growth. Important questions such as increasing intellectual and resource capacity, succession, and the future growth of the company are often considered too late.

Grassroots NGOs often have to react to too many needs and have little time or energy to think about the long term. But the best approach to gradually increasing capacity? Strategically planning for such growth, in phases. This will require strong management skills and a diverse network of supporters. NGOs should ask themselves:

· Is our organization making a substantial impact? How can we prove this?

· Do we want this organization to grow? In what ways? Do we have the intellectual and management capacity to make this happen?

· How can we involve others--advisors, board members, funders, employees--who might have new and needed skills?

· What will happen if the founder leaves? Is there someone who can effectively take his/her place?

· Since we can't do everything on our own, should we merge with another grassroots organization or larger nonprofit, and share hard-to-find resources?

This kind of long-term organizational planning should be seen as fundamental to the organization's work. Convening, organizing and networking to share resources would further strengthen grassroots organizations as a whole. Knowing the answers to these questions requires an honest evaluation of how the organization functions and can effectively grow - which can be essential to attracting new donors and retaining the ones you have already.

Christina Lem is a consultant to international foundations and non-profit organizations, ranging from start-up groups to large, established entities.

During the Spring Festival, I had a dream to modify the two policy documents of the Ministry of Finance and State Administration of Taxation regarding non-profit organization tax exemption. These two documents restrict the state's preferential taxation policies toward nonprofits (NPOs). To this end, in December 2009, 24 Foundations wrote to the Ministry of Finance and State Administration of Taxation, asking for a direct dialogue with Mr. Xie, the Minister of Finance and State Administration of Taxation director, Mr Xiao Jie, and to request the State Council to carry out a review on the two documents.

This event, on the one hand shows that China's policy environment for NPOs is unsatisfactory. But it also shows that NPOs know how to protect their own rights in accordance with legal procedures when their rights are being infringed, even by government departments.

Last year in October, I led a delegation of China's non-public offering foundations to the United States to a meeting at Harvard University, where I said: "China's economic reforms 30 years ago, rapid economic development has become the world's third largest economy, and surprised the world . I believe that over the next 30 years, China's development of its foundations will surprise the world, and even become second only to the U.S. Chinese foundations all believe this.

China’s "Foundation Management Regulations" passed in 2004 was a breakthrough for China's non-public fundraising foundations. By 2009, just five years later, the number of non-public fundraising foundations have gone from 0 to 846, and nearly matched the number of public fundraising foundations that have developed over the last 30-years (991). Even more exciting is that because of the rapid growth of private wealth, large private foundations have emerged in China. Last year, two Fujian entrepreneurs emerged: in the first half of 2009, Fuyao Chairman Cao Dewang announced he would donate 4 billion yuan in Fuyao shares in his father's name to set up the "Heren Foundation," which led to a controversy over whether you could use company shares to establish a foundation. This prompted the Ministry of Finance to issue this year a "Notice on Financial Issues regarding Equity-linked Corporate Charitable Donations", to clarify that shares could be donated to foundations. In the second half of 2009, Fujian Regal Chen Fa Shu donated 8.3 billion yuan in stock to the newly established Xinhuadu Foundation, making that foundation’s assets the largest in China. Non-public fundraising foundations represent the "rise of a new generation of non-governmental charitable initiatives in China" (People's Daily), and is of great significance to changing the environment for China's nongovernmental public welfare sector.

For a long time, due to the provisions of the dual management system for non-governmental organizations, China's foundations and philanthropic organizations have had a strong government background. Only the government or its authorized departments had the possibility of setting up charitable organizations. For non-public fundraising foundations, the Ministry of Civil Affairs can serve as both the professional supervising agency and the registration agency, in order for enterprises and entrepreneurs to give back to society, and realize corporate social responsibility and provide a channel for participation in public affairs. In other words, in the past, individuals and enterprises only had the power to donate money to participate in public service, now they can establish their own public welfare organizations.

The development of China's non-public fundraising foundations is in the early stages of take-off, and we can expect the next 10 to 20-year period to be the high tide. This will be in line with development of foundations in other countries.

2. Non-public fundraising foundations have broken through the irrational bottleneck blocking the allocation of resources for nongovernmental charitable foundations.

Public fundraising foundations have a history of more than 20 years in China. The public foundation's fund-raising, donations, daily management, etc., are not easily separated from government control. And the use of private donations often gets diverted from the people to the government, in order to make up shortfalls in the government’s budget. This trend does not conform with the reform of government functions, and inhibits the growth and development of non-governmental charitable efforts. Chinese non-profit organizations represent only about 0.3% of the service industry in terms of value-added and employment. This is a far cry from the world average. Non-governmental public welfare organizations’ difficulty in getting access to resources is an important reason. But the most important reason has to do with the difficulty of registering non-governmental organizations.

Non-public fundraising foundations have the autonomy to determine the direction of their public welfare projects and funding. Charitable resources can flow towards public service areas outside of the government system, and turn into an important resource provider for non-governmental public welfare organizations (commonly known as grass-roots organizations). This will fundamentally improve the environment for the development of non-governmental public welfare.

After the Wenchuan earthquake in 2008, non-public fundraising foundations rapid response became a major provider of funds for grassroots organizations’ rapid involvement in the earthquake relief and reconstruction. For example, Nandu Foundation which I work for, has funded more than 60 grass-roots organizations engaged in post-disaster reconstruction projects.

Before the advent of non-public fundraising foundations, public fundraising foundations that emerged out of government departments, had a hard time asserting their own independence because of the inextricable link that exists the government and these foundations. Nonpublic fundraising foundations do not share property or personnel with the government and thus are more independent of government.

4. Nonpublic fundraising foundations are breaking through the bottleneck of lack of capable practitioners in civil society organizations.

In the past, practitioners in China’s non-profit organizations were mainly of two kinds. One was former government staff or retired cadres. The second was intellectuals in the the pursuit of social ideals. What was lacking was professionals with management capacity. Nonpublic fundraising foundations have brought into the public arena a large number of such professionals who are well versed in modern corporate governance and market regulation. At the same time, non-public fundraising foundations can offer salaries that come closer to compensation packages that attract young professionals, and can have a major impact on improving the personnel structure of the non-profit sector.

The growth of nonpublic fundraising foundations has had a significant impact in fostering China’s civil society. In the large-scale development to avoid chaos, this is the consensus of colleagues in the industry. To this end, in 2009, China's non-public fundraising foundations Development Forum issued the "Declaration of self-discipline for non-public fundraising foundation." In January of this year, more than 30 non-public fundraising foundations and public fundraising foundations joined together to found the China Foundation Center, to encourage foundations to start disciplining themselves through information transparency, thereby improving the transparency and credibility of foundations, and improving the discipline, governance, standardization and service of foundations, so that we can look forward to the healthy development of China’s nongovernmental public welfare sector.